martedì 1 novembre 2016

Governor's decision comes at a key moment for the Bank of England

Ian King

Business Presenterike Mark Carney.

The Bank of England's 120th governor is, to his admirers, a skilled technocrat and a dedicated public servant whose swift and decisive actions after the EU referendum gave the public and commerce the confidence to continue with business as usual and prevented the economy going off a cliff.

To his detractors, he is someone who traduced the Bank's independence ahead of the referendum by endorsing the dire predictions made by George Osborne, the former Chancellor, about what the consequences of a Leave vote would be.

Those criticisms have become louder and louder in recent weeks as the economy has proved more robust in the wake of the referendum than the Bank - or, in fairness, most forecasters - had expected.

Mr Carney now stands accused by the likes of Jacob Rees-Mogg, a Conservative member of the Treasury Select Committee, of acting too hastily when the Bank cut its main policy rate and restarted its programme of asset purchases at the beginning of August.

Nor is Mr Rees-Mogg the only critic.

Many others in the Conservative Party have joined in the criticism, including prominent Brexit campaigners such as Michael Gove and two former Chancellors, Nigel Lawson and Norman Lamont.

One of Mr Carney's main offences in the eyes of these critics appears to be his closer proximity to Mr Osborne, who appointed him, than he appears to have to Theresa May and Philip Hammond - even though both have been at pains in recent days to stress their support for the Governor.

For his part, Mr Carney has said he is "absolutely serene" about the Bank's forecasts, insisting the Bank's "timely, comprehensive and concrete action" after the referendum had helped the economy to adjust.

Image Caption:Mr Carney has been clear that he will not be told what to do by politicians

He has also said he is not prepared to "take instruction" from politicians and reminded his listeners that operational independence means "the objectives are what are set by the politicians. The policies are done by technocrats".

Not since it was given operational independence in 1997 by the newly elected Blair government has there been any suggestion that that independence may in any way be compromised.

The first Governor in the post-independence era, the late Eddie George, came under little or no criticism from politicians.

His successor, Mervyn King, was the subject of some grumbling after his initial refusal to prop up Northern Rock but, unlike Mr Carney, there were few explicit attacks on him from politicians.

With Mr Carney, it has sometimes seemed like open season, with one of the most surprising of attacks coming from William Hague, the former Foreign Secretary, who used a recent Daily Telegraph column to attack central bankers and warn that, unless they began to raise interest rates, "the era of their much-vaunted independence will come, possibly quite dramatically, to its end".

This was seen in some quarters as an outright threat to the Bank from a grandee whose opinions still hold great sway in the Conservative Party.

Much of the criticism, undoubtedly, stems from Mr Carney's stance during the run-up to the referendum.

Yet there are also those who criticise him for his policy-making.

In August 2013 during his first public appearance as Governor, Mr Carney unveiled "forward guidance", a way of explicitly guiding the markets as to how the Bank would reach future policy decisions.

Specifically, he indicated that the Bank might raise interest rates once unemployment fell below 7%, something that happened in April 2014 - but which did not trigger a rate hike.

In June 2014, delivering a speech at Mansion House, Mr Carney warned that a rate rise "could happen sooner than markets expect".

Again, however, nothing happened.

Then, in the most controversial such event, Mr Carney said in July 2015, at a speech in Lincoln Cathedral, that a possible interest rate rise could come "into sharper relief" around the "turn of the year".

Again, no rate hike.

It was these kind of indications on policy that led the Labour MP Pat McFadden, another member of the Treasury Select Committee, to describe Mr Carney as an "unreliable boyfriend".

The Governor, when confronted by this in various outings before the Treasury Select Committee, has maintained calm and dignified.

He is prepared to accept such slings and arrows as part of his job.

And, the chances are, he cares more about the views of the public and owners of small businesses than he does about those of the City's legions of professional Bank-watchers.